iFOREX Daily Analysis : May 25, 2016
iFOREX | May 25, 2016 06:24AM ET
The dollar pushed higher to hit a fresh two-month peak against the other major currencies on Tuesday, after data showed that U.S. new home sales rose far more than expected in April, added to expectations for a June rate hike by the Federal Reserve.
The U.S. Commerce Department said new home sales rose by 16.6% to 619,000 units last month, compared to expectations for a 2.0% increase. The data came after St. Louis Fed President James Bullard said Monday that more factors favored a gradual rate increase versus keeping them steady. Separately, San Francisco Fed President John Williams said he still sees the central bank raising interest rates two to three times this year.
Elsewhere, sterling gained ground after the latest ORB poll, published in Tuesday's Telegraph newspaper, showed that the “Remain’ campaign has a 13-point lead over the ‘Leave’ campaign ahead of the June 23 referendum on Britain’s European Union membership. Support for remaining in the EU stood at 55%, while support for Brexit was at 42%. Meanwhile, the U.K. Office for National Statistics said public sector net borrowing came in at 7.2 billion in April, down 4.4% from a year earlier, while economists had forecast a shortfall of 6.6 billion.
Today the Ifo Institute is to publish data on German business climate; the U.S. is release data on the goods trade balance as well as a weekly report on oil stockpiles; meanwhile, Philadelphia Fed's Harker, Minneapolis Fed President Neel Kashkari and Dallas Fed President Rob Kaplan are due to speak; while the Bank of Canada is to announce its benchmark interest rate and publish its rate statement.
EUR/USDThe euro fell to fresh 1-month lows on Tuesday, as vigorous new home data in the U.S. augmented the dollar, raising the likelihood that the Federal Reserve could approve its first interest rate hike of the year at its next meeting in mid-June.
The currency pair traded in a tight range between 1.1139 and 1.1226, before settling down 0.70% for the session.
The single currency also weakened after the ZEW Centre for Economic Research said its index of German economic sentiment declined to 6.4 this month, from April’s reading of 11.2, while analysts had expected the index to rise to 12.0 in May. Furthermore the index of euro zone economic sentiment dropped to 16.8 in May, from 21.5 a month earlier, missing forecasts for 23.4.
Today investors will focus on the data on German business climate, released by the Ifo Institute.
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Gold fell sharply on Tuesday, dropping to fresh 1-month lows, as robust new home data in the U.S. lifted the dollar and a closely-watched survey on declining sentiment toward a potential Brexit weighed on the precious metal.
Gold traded between $1,228.00 and $1,252.60 an ounce before settling at down $22.65 or 1.81% on the session.
Gold extended Monday's losses after the U.S. Commerce Department said that new home sales in April soared 16.6% to a seasonally adjusted annual rate of 619,000, the highest monthly gain in nearly 25 years.
Today gold traders will focus on U.S. data on the goods trade balance, as well as on the speeches from Philadelphia Fed's Harker, Minneapolis Fed President Neel Kashkari and Dallas Fed President Rob Kaplan, to gain more information on the strength of the greenback.
WTI Oil
Crude prices rose considerably on Tuesday, remaining near 6-month highs, as Iraq's OPEC governor expressed concerns regarding the nation's slowing output, helping ease supply levels from near-record highs.
In London, Iraq OPEC governor Falah Alamri indicated that production nationwide is hovering around 4.5 million barrels per day, amid slowing output due primarily to poor weather, maintenance issues and numerous power outages. In addition, Alamri said Iraqi production has been dented by a halt in production among several oil fields in the northern Kirkuk region, responsible for pumping 170,000 bpd. Separately, Iraq minister of industry and minerals Mohammed al Daraji said at the same conference that it needs the price of oil to increase to around $65 a barrel in order to plug the requisite budgetary gaps.
Today oil traders will be focusing on U.S. stockpile data for fresh supply-and-demand signals.
US 500
U.S. stocks rose sharply on Tuesday, erasing all of their losses from the previous two sessions, as robust new homes sales last month lifted homebuilder and supplier stocks, while a surge in tech stocks helped trigger one of the strongest one-day rallies in the NASDAQ Composite index on the calendar year.
The Dow Jones Industrial Average soared 1.22%, while the S&P 500 Composite index gained 1.37%, and the NASDAQ, meanwhile, surged 2.00%.
On the S&P 500, all 10 sectors closed in the green, as stocks in the Technology, Financials and Health Care industries led. Investors capitalized on a short squeeze in Tuesday's session, piling into the three battered sectors. In total, seven different industries closed up by more than 1% on Tuesday.
Today investors will focus on U.S. data on the goods trade balance, as well as on the speeches from Philadelphia Fed's Harker, Minneapolis Fed President Neel Kashkari and Dallas Fed President Rob Kaplan, to gain more information on the strength of the American economy.
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